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HOTEL BUSINESS REVIEW

DECEMBER FOCUS: Hotel Law

 

Cybersecurity Checklist : 12 Security Risks Hotels Must Address

By Mark Melodia Partner - Data Strategy, Security & Privacy, Holland & Knight | December 2019

This article was co-authored by Mark Francis, Partner - Data Strategy, Security & Privacy, Holland & Knight

In April 2019, Symantec reported that nearly 70% of hotel websites Many of the leaks were attributable to third-party tools and plugins running on the websites.

Vendor Breaches

In June 2019, CPO magazine reported that a third-party data breach was to blame for major hotel chains.

In August 2019, a hotel vendor left a customer database exposed and information relating to 700,000 guests was stolen.

The hospitality sector is not subject to only the above "garden variety" cyber attacks; some forms of attacks are more tailored to this industry. For example, criminals have used cyber attacks to circumvent keycard locks and break into hotel rooms-long crime sprees Despite efforts to address such issues in recent years, security researchers demonstrated again in April 2018 how a one-minute attack

The common theme in many, if not most, cyber attacks is the involvement of a vendor. This is not particularly surprising given that most businesses now rely heavily on third-party service providers. Virtually every regulator and industry standards organization has therefore called out vendors as a key security risk that needs to be addressed by organizations.

Cybersecurity as a Risk Management Function

Cyber attacks present various forms of business exposure, such as losing customers, reputational harm, and loss of trade secrets. But they are also associated with legal exposure, including B2B liability, class actions and government investigations. The risk spectrum continues to evolve, with more recent exposure stemming from whistleblower claims regarding poor cyber practices, as well as shareholder derivative suits and securities class actions. Like many other sectors, the cybersecurity challenges faced by the hospitality industry represent a growing percentage of enterprise risk, and therefore cybersecurity is ultimately about risk mitigation.

This risk can certainly be mitigated through a variety of technical safeguards (like firewalls and antivirus), administrative safeguards (like employee policies) and physical safeguards (like CCTV and secured facilities). But identified risk can also be managed and mitigated by shifting or transferring risk through contractual obligations and insurance. This is particularly true in the context of vendor relationships.

Vendor Risk Management

As a starting point, vendor relationships can be managed through a risk management program with the following elements, which may also be viewed as a vendor lifecycle:

  1. Planning/Governance: The foundation of a vendor program includes a determination on who will supervise vendors, setting baseline vendor security requirements, maintaining an inventory of vendors, and understanding the risks associated with each vendor (i.e., what data or systems will they have access to).
  2. Due Diligence: Onboarding a new vendor typically includes an assessment of their security posture (through questionnaire responses or reviewing their internal security documentation), determining how and under what circumstances they will handle personal information or other sensitive data, and identifying whether they have any material subcontractors.
  3. Contracts: Addressed below in detail, contracts not only establish binding security requirements that reduce cyber risks, but also allocate risk between the parties in the event something goes wrong.
  4. Monitoring: Companies need to periodically ensure compliance with contractual security commitments, particularly with respect to vendors with access to sensitive data or systems.
  5. Termination: At all times, starting at the outset of a new relationship and during contracting, companies should have a viable exit strategy for vendors who provide critical services and contemplate breach of contract scenarios, bankruptcy or other disruptive events.

Vendor Contracts: The Cybersecurity Checklist

Here is a checklist of cyber-related considerations to address in contracts for vendor relationships that present security risks, as well as related data privacy and ownership considerations.

1. Security

Security provisions are not a one-size-fits-all in contracts. At a minimum, any vendor who (i) receives sensitive data or (ii) gets access to an organization's systems should be required to preserve the confidentiality, integrity and availability of company's confidential information with commercially reasonable administrative, technical and physical safeguards. Many agreements include a requirement to conform "with generally recognized best practices and industry standards" but there is no clear interpretation of this phrase, so companies may often want to consider including more specific security requirements or, alternatively, mandate compliance with particular legal regulations or industry standards. These requirements should be auditable in some fashion, as described below.

2. Applicable Laws and Regulatory Requirements

Contracts frequently impose compliance with regulatory requirements on vendors, although they may be unclear as to what circumstances actually require such compliance. Such "catch-all" provisions should be clarified where possible to limit unnecessary burdens in view of the data that will actually be exchanged pursuant to the agreement. For example, reference to specific healthcare or financial services laws is sensible when the information they cover is within the scope of contracted services. In addition, particular addition may be needed for evolving privacy and security laws with specific requirements for service providers, including the California Consumer Privacy Act (CCPA) and the New York Stop Hacks and Improve Electronic Data Security Act (SHIELD Act).

3. Data Privacy

Contracts that involve the exchange of personal information (such as employee or customer data) should call out whether specific requirements apply to the handling or use of the information. The vendor may need to comply with the company's public privacy policy or specific regulatory requirements or commitments. Where the vendor wants to use the information for other purposes, there may be room for compromise, such as permitting the receiving party to sufficiently anonymize the information and use the aggregated data outside the scope of the contract, such as for analytics purposes.

4. Data Ownership/Licensing

Many agreements that address intellectual property rights and data security are less clear about ownership of data, particularly data created pursuant to the agreement, which might reflect contributions by both parties. Any contract involving the exchange or use of data should specify who owns what data. In many instances the data owner will give the counter party a license to use the data, either for the life of the contract or potentially in perpetuity. The provision should indicate whether the licensee's data use is limited to fulfilling purpose of the contract or if data can be used for other purposes. Ownership and license rights for personal information requires particular attention because it impacts privacy obligations, consumer commitments, and legal obligations (such as under the CCPA).

5. Data Breach and Notice Procedures

A vendor should be required to provide prompt notice in the event of a breach, and notice provisions may include a specific timeframe for disclosure. An organization must be mindful that its own notification obligations may be triggered in the event of a vendor breach, and it often cannot afford delays in notification on the part of a vendor. Vendor cooperation in any breach investigation and notice to law enforcement, regulators, and affected individuals is also important.

6. Audit Rights

Ongoing monitoring is increasingly necessary in vendor risk management, but it can take many forms, including onsite visits, annual questionnaires, or periodic third-party compliance or certification reports (e.g., SOC 2, Type II). But organizations with dozens or hundreds of vendors should be mindful of the fact that they cannot realistically conduct intense audits of all their vendors on a regular basis and should therefore (i) focus on vendors that present the most risk, and (ii) ensure that audit provisions are practical and achievable. Audit provisions often permit an audit each year or after an adverse event (e.g., data breach or discovery of noncompliance with security obligations).

7. Liability and Indemnity

There is often no issue as contentious in current contracting as the allocation of liability and indemnity obligations for cybersecurity and data privacy issues. Negotiation leverage ultimately plays a large role in resolving liability and indemnity terms, but they should be carefully assessed so an organization understands its risk exposure. In more balanced negotiations, risk allocation is often commensurate with, or based off a multiple of, the deal value.

8. Cyber Insurance

Cyber insurance is increasingly required in deals as a backstop for the vendor's liability and indemnity obligations. It is particularly important with smaller vendors who may be unable to independently cover obligations. However, vendor policies may have sub-limits and exclusions for particular forms of exposure, and may be needed in an incident to cover other vendor customers, so companies evaluating the risk in a vendor relationship should recognize that the insurance limit referenced in a contract does not guarantee that same amount will be available in all instances.

9. Subcontractors

Security and privacy obligations should be required to contractually flow down to subcontractors in material respects, particularly where such subcontractors will have the same level of access to company data or systems. For highly sensitive services, subcontractors may even be subject to approval of the company.

10. Cross-Border Transfers

More than ever before, contracts need to be clear on where data can be processed or stored. For example, personal information that is processed or stored in the EU can subject the data-and by extension its owner-to the EU's General Data Protection Regulation (GDPR), even if it pertains to non-EU residents. There are also risks in permitting sensitive data to be accessed overseas in jurisdictions where it will be difficult or impractical to pursue violations of the contract (such as theft of data or intellectual property).

11. Termination and Data Format

An organization should ensure it has a right to collect all of its data maintained by the vendor and identify a specific data format that will be compatible with other systems. In the event of a breach of contract or termination, the relationship may have soured and a clear contractual obligation to transfer data in a usable format may be crucial to ongoing business activities that rely on the data. There have been recent instances of "data hostage taking" where disputes result in a vendor holding data in return for invoices due or other payments.

12. Preparing for Change

One final point that should be considered is how the organization and vendor will collaborate to update their negotiated terms and address new risks if the documented security requirements are no longer sufficient. There have been a number of vendor data breaches due to outdated practices that vendors continued to adhere to because that was what the contract specified.

Negotiating Through Conflicts

Above all else, contract conflicts are subject to the respective negotiation leverage of each party (i.e., who needs who more). That said, there are generally workable solutions to many initial conflicts on terms. Companies should be pragmatic about capabilities, compliance needs, and the "cost" of concessions. It is often helpful to be proactive around risk issues, such as by establishing internal security baselines, template requirements aligned with legal obligations and service needs, and a risk tolerance posture.

In lieu of, and in addition to, solving for risk through contractual obligations, it is important to leverage other means to reduce exposure, such as considering the company's own cyber insurance, restricting the amount of data sharing and systems access given to third parties as much as possible, and adopting policies and technical safeguards that can supplement the vendor's own practices.

For example, in some instances vendors can perform services within a segregated system environment maintained by the company, so the data remains within the company's control rather than be accessed or hosted on a vendor's own systems.

With attention to the checklist items and considerations above, the risks associated with vendors can be managed both individually and collectively to best protect the company's cyber risk profile.

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You hereby authorize HotelExecutive's Internet Payment Service Provider to charge your credit card to pay for your membership to HotelExecutive. You further authorize HotelExecutive's Internet Payment Service Provider to charge your credit card for any and all purchases of products, services in association with HotelExecutive. You agree to be personally liable for all charges incurred by you in association with your access or other use of any content provided by HotelExecutive or any third party in association with HotelExecutive. You acknowledge and agree that your liability for all such charges shall continue after termination of your access or any type of membership arrangement with HotelExecutive.

In the event that you have chosen to have your membership automatically rebilled, unless and until you notify HotelExecutive that you wish to cancel or terminate your membership to HotelExecutive, you hereby agree and authorize HotelExecutive's Internet Payment Service Provider to automatically renew your membership to HotelExecutive on a continuing basis and to charge your credit card (or other payment means you have selected) to pay for the ongoing cost of your membership. You hereby further authorize HotelExecutive's Internet Payment Service Provider to charge your credit card (or other approved payment means you have selected) for any and all purchases of products, services and entertainment provided to in, at, through or in association with HotelExecutive.

13. PRIVACY POLICY

The following is the Privacy Policy for HotelExecutive

We can be reached via telephone, email, or online at our contact page. When you visit our site we do not log any information regarding your domain or email address. Information Sharing: We do not share user information with any third parties other than via press release distribution as described below.

Hotel Newswire is a newswire service that distributes press releases on behalf of our users. If you decide to submit a press release for distribution through our system we will transmit your entire press release including any personal information therein contained to our media contacts and online distribution points including search engines. This is the only redistribution of your information that we engage in. Your submission of press releases through our system indicates consent with this policy. The information we collect during your registration process is used to notify users about updates to our service and inform users of any special events hosted by Hotel Newswire. This information is not shared with other organizations for commercial or non-commercial purposes.

Cookies: Our system requires the use of cookies to enable the user to log back into our website to access information from the newswire, without having to log in each time using the required username and password.

If you do not want to receive email from us in the future, please let us know by following instructions included in our communication with you. Users who supply us with telephone numbers online may receive telephone contact from us regarding their account, or informing them of new products and services available on the HotelExecutive website. If you do not wish to receive such telephone calls, please edit your account and remove your phone number from your account profile. This can be done from your user account menu.

Ad Servers: We do not partner with or have any relationship with any ad server companies. From time to time, we may use customer information for new uses not previously disclosed in our privacy notice. If our information practices change at any time, we will post the policy changes to our website to notify you of these changes and provide you with the ability to opt out of these new uses. If you are concerned about how your information is used, you should check back at our website periodically.

Upon request we provide site visitors with access to all information (including proprietary information) that we maintain about them. Users can access this information by logging in to their account.

Security: We always use industry-standard encryption technologies while transferring and receiving user data exchanged with our site. We have appropriate security measures in place in our physical facilities to protect against the loss, misuse, or alteration of information that we have collected from you on our site. We do not store credit card information in our systems.

If you feel that this site is not following its stated information policy, you may contact us.

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